Stock Advice: Sell Facebook, Buy Amazon

Social Groundswells Are Fine, But They Will Never Match Hard-Nosed Targeting of Purchase Behavior

Last week Amazon took the wraps off its "Amazon Media Group." As Advertising Age noted, "Amazon isn't exactly a newcomer to advertising, but until recently its ad efforts existed in a sort of extended beta." The fact that Amazon now feels ready to rollout an integrated advertising platform should make the world stand up and take notice, both offline and online.

This may indeed be a watershed moment in online advertising. One reason to take notice is obvious: Amazon's size. How big is Amazon? As anyone who has not been under a rock knows, it is the largest global online retailer. What everyone may not know is that it is more than four times bigger than the second-largest online retailer (Staples). In terms of total retail sales online or offline, it sits just outside the top 10.

A much more important reason to stand up and take notice is that Amazon can offer the holy grail of online delivery and detailed measurement on a scale that simply cannot be matched by anyone. They can deliver ads based on purchase behavior across an eye-popping array of consumer categories. Books? Of course. Videos? Toys? Yup. That's obvious. What's not so obvious is groceries, jewelry, pet supplies, scientific and medical instruments, just to name a few non-entertainment categories. Amazon has its digital fingers in lots of real-world pies.

In short, there is no single retailer that has more of the kind of ready purchase behavior-based analytical information that marketers drool over than Amazon. That's why Lisa Utzschneider, Amazon's global head of advertising, so easily lets drop that P&G and other CPG marketers "love" Amazon's new advertising offerings. Or why she notes that companies (like Chrysler), who sell products you cannot even buy on Amazon, are equally enamored of using their platform to reach Amazon buyer segments who have a high propensity to buy certain products.

Amazon is in a pretty powerful position as an online retailer. When you start to consider that it is also a company that can provide advertising into its own media platform, Kindle, the power becomes even more apparent. Utzschneider is probably downplaying when she says that Amazon has "pretty advanced targeting capabilities" for both lifestyle and in-market segments.

Amazon is rolling out on a big scale what other online properties have been promising and not delivering for years. Others trumpet "measurability" and "analytics," but Amazon can analyze data based on real day-to-day purchase behavior with scale across purchase categories. Their data is better and the models they can create from their data are better. It's not just big data, but relevant big data.

Years from now, when we look back, I am willing to bet that the sort of grounded analysis Amazon can deliver to targeted ads will trump the social trending analysis that Facebook and other social networks can create. Facebook does perhaps have a better opportunity to help brands create social groundswells. But social groundswells are less common than good old, hard-nosed knowledge about consumers' preferences as demonstrated by their actual purchase behavior. As anyone who has sat in a focus group knows, people don't tell the truth in social situations. It is not because people are liars inherently, it is because people are not really conscious of why they do the things they do. They often lie because they don't know how not to.

For my money, I will put my 401K dollars on Amazon's holy grail vs. Facebook's ceramic jug. Oh, and Amazon has tons of ongoing sales revenue should their advertising plan falter. That's much more than can be said of Facebook.

ABOUT THE AUTHOR

Brian Sheehan is is associate professor of Advertising at the SI Newhouse School of Public Communications at Syracuse University. He spent 25 years at Saatchi & Saatchi, the last nine years as chairman and CEO of Team One Advertising in Los Angeles.